TradiTional Taxis sTruggle in The Time of uber, ola
The combined market share of Ola and TaxiForSure was 80%, while Meru was at 12% and Uber was at 4%. The rest was occupied by all other taxi companies.
After the Delhi government banned surge pricing by appbased cab aggregators like Ola and Uber, one would expect the service providers to protest the announcement. However, the cab aggregators did not give a clear statement about the ban on surge pricing that is likely to be continued even after the odd-even scheme is phased out.
In a statement released by the Ola headoffice in Bangalore, the cab aggregator said, “We, as India’s leading mobile app for transportation, announce our support to the Delhi Government’s odd-even initiative by adding more vehicles on its platform to improve availability and reduce ETAs in the state.”
The company statement said: “We … have revoked Peak Pricing completely in this period. We are also ensuring maximum availability of cabs in Delhi NCR to cater to the increased demand during this phase. We have over 26,000 CNG vehicles in NCT of Delhi and have added more than 1,000 vehicles through our leasing program in the previous week. Additionally, we are also creating awareness and increasing adoption of shared mobility services like cab-sharing through Ola Share and convenient daily commute through Ola Shuttle. We are constantly working on improving availability and reducing ETAs across Delhi-NCR, in our endeavor to make odd-even a success for the state.”
However, a cab aggregator employee said: “It should be understood that the app based taxi services work on a demandsupply module. As a rule, we pay more when supply goes down. To book railway tickets in ‘tatkal’ we all have to pay extra. Similarly, on road there are people willing to pay extra when required. If nobody wants to pay the surge charge, the aggregators’ business will phase out on its own. So, why put a ban on this?”
The ban came after the onset of the second phase of the oddeven scheme in the city that led to numerous complaints by consumers against surge pricing. Technological experts for such cab aggregators said that surge pricing is algorithm based.
“The app-based taxi services are run on pricing algorithms. These algorithms are programmed to access demand-supply, distance travelled, time taken and then calculate fare. Surge pricing is the extra money that a consumer has to pay due to the lack of supply at that given time at a given place,” the experts said.
“When the demand for taxis is higher than the number of drivers around, the fare automatically increases. Surge pricing ensures that more taxis ply on the roads to help meet the increase in the demand of cabs,” Uber explained.
Surge pricing can sometimes be as high as 7-8 times the regular fare. The cab aggregators say that the price hike encourages more drivers to get back on to the roads and help them earn more money. Drivers make 80% while cab aggregators take home 20% on each ride and the same applies during surge pricing.
However, surveys conducted by technology experts on Uber’s surge pricing trends in the US claim that “surge pricing does lead to a decrease in waiting time for a cab. But to say that it is because more drivers are available on road since the prices went up won’t be absolutely right. What really happens is that surge pricing doesn’t bring more drivers out on the roads, but rather pushes drivers already on the job toward neighborhoods with more demand — and higher surge pricing. As a result, some neighborhoods are left with higher waiting times for a car.”
In Delhi, the situation is no different. For a majority of consumers it is a problem that they would prefer to be resolved with a ban. “With the odd-even scheme in effect, the role of cab has increased more than ever. Paying 5-6 times higher is obviously inconvenient and a fixed fare chart would solve many problems,” said Meenakshi Shukla, an IT employee.
In order to expand and meet demand, Ola also announced its Shuttle service. “Ola Shuttle will offer ‘Free Rides’ to commuters in Delhi-NCR on upcoming Friday again on 29 April. Free rides were also offered last Friday. The company statement added, “Ola has initiated on-ground awareness campaigns with volunteers from the beginning of the odd-even phase 2, stationed at key traffic junctions, around metro stations and other high footfall areas across the city to encourage and guide users to choose the most suitable ride-sharing option.”
App- based taxi aggregators are edging out traditional taxi services and other small time players from the business, especially shrinking the point-to-point services for which customers prefer the convenience of an Ola or Uber which is available at the click of a button at competitive prices.
Softbank Corp, an investor in Ola cabs, disclosed in its earnings presentation for its fiscal year on 11 May 2015 that the combined market share of Ola and TaxiForSure was 80%, while Meru was at 12% and Uber was at 4%. The rest was occupied by all other taxi companies.
“Our business for short distance travel has been shrinking since the arrival of radio taxis like Meru cabs, followed by the opening of metro services in Delhi and finally the entry of the taxi aggregators,” says Balwan Singh, who runs Shubham taxi services in Mayur Vihar. His cars usually take passengers to the airport and railway stations. For these and the occasional local travel bookings, the fare is charged on the basis of the number of hours the car is hired for. The number of kilometres travelled decides the fare for destinations out of station.
A few of Balwan Singh’s drivers too have occasionally switched over to the taxi aggregator services, drawn by the higher pay and flexible hours. They may be able to hike their average monthly salary of Rs 9,000-10,000 The demographic spread and economic activity of a city are important parameters for qualifying in the country’s ambitious Smart Cities project, experts have said, pointing out that these variables considerably influence the quality of administrative services in a city.
“The demographics, i.e. the working age population as percentage to the total population, density and the economics of the city, in particular the presence of industries that employ the workforce, are two very important determining variables. These three variables determine whether the city has the financial firepower to provide and maintain (meet capex and opex) of the city administration services,” Shashanka Shekhar Panda, CEO, Blue Earth Enterprise, told The Sunday Guardian. Blue Earth Enterprise has worked with NIUA in the recent past on organising a workshop on Sustainable Energy Integration in Smart to Rs 25,000, according to Balwan Singh. Some others have also bought their own cars and are running their own business, “which is a good thing”, Singh says.
Business is not good, a taxi operator in North Delhi admits, due to the crushing competition. He has attached two of his boys with Ola cabs because his cars would stand idle otherwise. Operating on a non-commercial licence, his business has also received a blow from the second phase of the ongoing road rationing scheme in Delhi.
“We have five cars. Two can ply today and three tomorrow. In fact, I have to refuse clients although calls are pouring in for rides. We don’t have the appropriate number for today,” he says.
There are three types of cabs plying on roads — yellow top (AC and non-AC), radio cab, economy radio cab, and aggregators like Ola and Uber. Apart from these, there is a section of operators (like the one mentioned earlier) who use privately owned vehicles, which is illegal as per the Motor Vehicles Act.
Other operators have been luckier during this phase. Hardeep Singh, who runs Chandigarh Taxi service from GK 1, says there have been a greater number of booking requests for local travel during the period. However, for point-to-point services on a regular day, business has taken a beating for this operator who owns a fleet of 15 cars. He has mainly corporate clients with whom the fares are fixed on a one-on-one dealing and his drivers earn an average of Rs 15,000 to 20,000 per month.
“Ola, Uber distribute freebies to their drivers to lure them away from our businesses. But once they have monopoly, the incentives will also end. They will exploit the customers the way they did recently, increasing their prices at peak time once the odd and even rule was implemented,” says Hardeep.
Ola and Uber had come under fire from the Delhi government for hiking fares up to four-five times when the road rationing scheme was implemented. The companies suspended surge pricing — charging higher fares when the demand is high and supply is low — temporarily, while the oddeven scheme is underway.
While surge pricing itself is not illegal, the question is which category of vehicles do cabs associated with taxi aggregators come under.
Currently, the government-regulated prices for a non-AC yellow top cab is Rs 14 per km and for an air conditioned cab it is Rs 16 per km. Fares for radio taxis have been capped at Rs 23 per km, while for economy radio taxis, it is Rs 12.5 per km.
Time and again, the Delhi government has entered into litigation with Uber and Ola, trying to get them to agree to a certain amount of regulation that taxi operators in this city are governed by. The companies, however, argue that they are technology companies, and the regulations that the government frames for them should not throttle the innovation that their business model brings in. Aggregators like Uber face problems in all countries since they are not guided by the local Acts governing motor vehicles.
Yet they flourish because they attract people claiming a low base fare which often rises due to other levies. Both the taxi hailing services’ lowest fares are about Rs 6-7 per km, but add to this the variable “ride time rate”, which according to reports is an additional charge depending on the travel time, and other taxes (service tax, education cess), the effective price even without surge rates is sometimes comparable to the fare charged by other public transport ser- vices.
The ubiquitous yellow top cabs have not fared well either, but they too are pulling through on income from ferrying passengers to and from the airport or railway stations. Some, like Jaswinder Singh provide service to five-star hotels in the city. Stationed outside Crowne Plaza Hotel in Mayur Vihar, Jaswinder explains, “We pick up and drop guests at the hotel and charge them according to a fare chart that was prepared by the hotel’s chief. We also ferry the staff and charge Rs 10/km.”
Six men who have their own cars provide service to the hotel here. The hotel puts them up in its rooms, has arrangements for their meals and allows them to park their cars in the garage overnight, but their income comes solely from the passengers, who are guests at the hotel, and occasionally from the hotel staff.
Traditional radio cabs have meanwhile diversified their services. Carzonrent chief R.K. Vij says, “(Our company) operates in Corporate, Limo and Airport services and Myles is a self-drive service, besides point-to-point taxi services which are operated under Easy Cabs brand. We are a profitable company established over the last 15 years with market leadership in the car rental business and are building a very exciting self-drive/car sharing business which has huge growth potential in India.”
“Therefore, for larger part of our business, we do not compete with Ola/Uber,” he adds.